Review Questions and Final Exam Course name: Course number: 920215 Number of questions: Prerequisite: Review Final exam None 10 10 Course level: Recommended CPE credit: Recommended study time: Course format: Reference text: Basic 2 CPE hours 2 CPE hours Interactive self study CPE credit calculated as 100% of total study time PDF file Read online, save to your hard drive or print 27 pages Subject classification: Ethics Course updated: February 26, 2015 Learning objective: Instructions: Review ethical considerations, as well as rules and regulations that apply to practitioners enrolled to practice before the IRS. This copy of the exam can be used to answer questions while offline. Please note that you will still need to enter your answers online by logging into the course system with your User ID and Password. Go to www.funcpe.com: top of page Student Login link www.funcpe.com Toll free: 877-738-6273 help@funcpe.com
Exam Name: -Review Questions 1) Bill Kid is a tax preparer and has obtained a Preparer Tax ID Number (PTIN), but he is not an Enrolled Agent (EA). He prepares less than 20 returns per year. The IRS requires that Bill complete continuing education each calendar year in order to renew his PTIN. 2) Ms. Rong, EA, received a lawful request for information from an authorized employee of the IRS. Although Ms. Rong feels that some of the information she received from her client is privileged, she must provide all requested information to the IRS. 3) Ms. Kline, EA hired a freelance bookkeeper on elance.com to prepare financial statements for her clients. Per the listing on elance.com, the bookkeeper had over 10 years of experience. Ms. Kline does not need to supervise, train or evaluate the bookkeeper, because the bookkeeper is a qualified independent worker, not an employee. 4) Mr. Tinfoty, EA offered to refund the client s tax preparation fee if they were audited. This type of fee arrangement is considered a contingent fee. 5) Ms. Thompson, EA, has a client that refuses to pay the full amount of the agreed upon fee for completing their tax return. The client has requested that all her supporting tax information be returned to her promptly. Ms. Thompson has not filed the return and refuses to return phone calls from the client. The return is due in ten days. Ms. Thompson appears to be violating the provisions of the IRS regulations governing the practice of tax practitioners. 6) Ms. Wilful, EA, knows that representing both Mr. X and Mr. Y involves a conflict of interest, but she believes that she will be able to provide competent and diligent representation to each client. She has discussed the conflict of interest with both parties in a conference call and they each agreed to continue to allow Ms. Wilful to continue to represent them. Ms. Wilful can feel confident that she has followed the proper procedure in resolving this matter and does not need to do anything further. 7) Ms. Jenson, EA is trying to expand her practice and prepared some flyers to mail out to members of her breakfast club. The flyers have the following information: Catherine Jenson, admitted to practice before the IRS Representing Taxpayers for over 10 years Course 920215 www.funcpe.com Page 2 of 5
Call 111-222-3333 to schedule a free consultation This flyer was sent to members of the Early Morning Breakfast Club as a solicitation for new clients. Assuming the information shown is factually true and that the solicitation does not violate Federal or State law or other applicable rules, this flyer most likely conforms to advertising and solicitation restrictions for tax practitioners. 8) Ms. Jenson, EA mailed a fee schedule to clients on March 1st and did not distribute or publish her fee schedule after that. On April 1st, she decided to start charging double the previously mailed fee schedule rates. This fee increase is allowable under the regulations. 9) Practitioner fee information may be communicated by email. 10) Ms. Thompson, EA, is preparing a tax return for her client. Her client wants to deduct the cost of depreciating a car for businesses purposes, but Ms. Thompson knows the client doesn't own a car. Her client argues that most businesses have deductible auto expenses, and she doesn't want to miss out on a common deduction. If Ms. Thompson advises her client that this position will likely result in a penalty if the return is selected for audit, then she can still prepare and sign the return with the auto deduction. Exam Name: -Final Exam 1) Enrolled Agents are required to obtain the Annual Filing Season Program-Record of Completion if they wish to be listed in the IRS Directory of Preparers. 2) Henry Filibuster, EA, prepared a tax return for Sandy Smith. Sandy owns Komfy Kats, Inc., which produces custom beds for cats. After the return was filed, Sandy mentioned to Henry that she moved all her business records to her brother s house. When the IRS requests some Komfy Kats, Inc. business records, Henry must: A) Keep the location of the records confidential. B) Notify Sandy that she should move the records to another location. C) Tell the IRS representative that Sandy said she moved the records to her brother s house. D) Contact Sandy s brother to obtain the records for the IRS. Course 920215 www.funcpe.com Page 3 of 5
3) Dewey Dilligent, EA prepared a return for his friend Bob, who is a professional dog walker. Bob has mentioned in the past that he received quite a few payments in cash, but Dewey noticed that only credit card payments were recorded in his QuickBooks ledgers. How should Dewey handle this situation? A) Sign and file his return based on the information Bob provided, with no further work B) Contact a sampling of Bob s past customers to ask if they paid in cash C) Review Bob s bank statements for any unreported cash deposits D) Advise Bob that all income must be reported, including cash income, and explain the penalties associated with not including the cash income on his return. 4) Matthew recently became an EA and started a small tax practice this year. He expects to be very busy during tax season, so he hired Shady Smith to work for him part-time preparing the more complex returns. Shady is currently under suspension to practice before the IRS. As long as Shady does not sign the returns, this assistance from Shady is acceptable. 5) Bill Moore, EA, met with a client who requested that Bill represent him before the IRS. The client owed several years of back taxes. The client asked Bill to agree to a contingent fee of 15% of any back taxes that were waived. This fee arrangement IS acceptable. 6) Mr. Bean, EA, prepared a tax return for his client. Unfortunately, the client was not satisfied with the tax due calculated and refused to pay the full fee. Mr. Bean CAN refuse to give the client or allow the client to make copies of. A) Records that must be attached to the client's tax return. B) The client's own bank statements. C) The client's sales ledger D) His tax research summary and conclusions. 7) Ms.Goode, EA is opening up a new tax office next to a competitor. She wants to entice new customers to stop by her new office. Which of the following would be acceptable to put on a sign outside her office? A) Mary Goode, admitted to practice before the IRS B) Mary Goode, Certified IRS Representative C) Refunds2U--We get the biggest refunds for taxpayers D) Guaranteed Tax Returns--No audit guarantee or double your money back 8) Laura Loophole, EA, published a rate schedule on February 1st by putting a sign in the waiting area of her office. She is swamped with work and wants to raise her fees substantially, so she takes down her sign on March 1st. She must wait days past March 1st to charge more than her rates displayed on her sign. A) No waiting time; as soon as she took down her sign she could raise her rates B) 30 days C) 60 days D) One year Course 920215 www.funcpe.com Page 4 of 5
9) Eileen Write, EA, has taxpayer refund checks sent directly to her, endorses them and deposits the funds, then writes a check to the taxpayer to properly route the funds to the taxpayer.this IS an acceptable practice in which of the following instances? A) It is never an acceptable practice for a tax preparer to negotiate a taxpayer check. B) Eileen deposits the funds in a trust account separate from her operating account. C) Eileen remits the payment within 14 days of receipt of funds. D) The taxpayer provided written consent for this arrangement. 10) Marvin Mysterious, EA prepared a tax return for Jane Jones. Jane owns Teddy Bear Hats, Inc., which produces paper hats for stuffed animals. Jane told Marvin that she writes off her weekly manicures, because she says that working with paper hats is damaging to her nails. Marvin can sign the return, knowing about the expensed manicures in which situation? A) Provided Jane signs a waiver that she understands that manicures are not a valid business expense. B) Marvin cannot sign the return because the manicure expense lacks a reasonable basis. C) The manicure expense is less than 1% of revenues, and thus immaterial. D) Manicures are paid for by bartering the teddy bear models used in company advertising. Course 920215 www.funcpe.com Page 5 of 5